present urea is sold at an administered price of Rs 5,310 per tonne, while remunerative price for the companies would be more than double this. The widening differential between the remunerative price for the industry and the MRP along with the high cost of imported urea (imports account for a quarter of domestic consumption of the fertiliser at present) are the reasons why the subsidy bill has increased exponentially in recent years.
In Budget 2013, the fertiliser subsidy was estimated at Rs 60,974 crore, including Rs 13,398 crore for imported urea, Rs 19,000 crore for indigenous urea and Rs 28,576 crore for the sale of decontrolled fertilisers (DAP, MOP and complexes). The fertiliser industry has sought an additional subsidy payments of Rs 40,000 crore in this fiscal.
The government recently constituted a group of ministers (GoM) headed by agriculture minister Sharad Pawar to look into urea pricing. The GoM will also include finance minister P Chidambaram, fertiliser minister MK Alagiri and oil minister M Veerappa Moily.
There has been no significant investment in urea capacity in a decade in India. Encouraged by the new investment policy on the cards, eight companies have expressed their intent to set up new plants of 1.2 million tonnes each, at an estimated cost of Rs 4,200 crore per plant. These include Rashtriya Chemicals & Fertilizers, Tata Chemicals, Indo Gulf Fertilisers, Nagarjuna Fertilisers & Chemicals, Chambal Fertilisers, Iffco, Gujarat Narmada Valley Fertilisers Company and Gujarat State Fertilisers & Chemicals. Industry sources said implementing the Rangarajan panel suggestions could derail these investment proposals, prompting companies to step back, unless the government explicitly ensures higher subsidy payments.
The price of gas from the once-prolific Krishna-Godavari block off the Andhra coast (where the output has seen a sharp decline) is slated for review by an empowered group of ministers in 2014. The current price of $4.20/mmBtu was fixed in 2007 and implemented from 2009 for a five-year period.
With gas production from the KG-D6 block expected to fall further from existing 24 million standard cubic metres per day (mmscmd) to 18 mmscmd next year, the fertiliser ministry wants to protect